Western Europe is forecast to see 1.5% GDP growth in 2019 with Eastern Europe projected to see 2.4% GDP growth in 2019:
How European Union construction materials and labor costs will adjust in a post Brexit scenario are just about impossible to forecast. The latest news is that the UK obtained an extension and will now have until May 22nd to complete its withdrawal from the European Union, stay tuned a lot could happen in the next month or two.
Forecasting the European Construction EPC sector is a difficult task, bearing in mind that there are more than 30 diverse countries that all have different rules and regulations, engineering and construction related approaches. The construction market forecast for each of these countries fluctuates on politics of each Governments economic policies or on collective European Union mandates.
The countries that are forecast to see positive growth as it relates to construction activity include Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Ireland, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Turkey and the Ukraine. All of these countries are projected to experience GDP growth of between 2% and 3.5% for the remainder of 2019.
The countries that are projected to see minimal or no growth as it relates to construction activity include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK. All of these countries are projected to experience GDP growth less than 1.5% for the remainder of 2019.
The UK’s Brexit political crisis has become progressively worse in the last three months. The UK is set to drop from its # 5 ranking to # 7 of the words largest economies rankings. Brexit in many ways is the direct cause of this demotion. Brexit negotiations are still in a state of flux, more than two years after the UK’s referendum. This economic uncertainty is expected to have a negative impact on construction activity for the remainder of 2019. The economic impact and uncertainty of Brexit continues to impact the UK, the Pound Sterling has dropped more than 15% against the US Dollar in the last two years, currently trading at $1.32 to the US $ (3/22/2019), the UK economy and its construction sector continues to weaken.
The UK housing market activity and pricing in and around London is starting to trend downwards as we move into the 2nd Q of 2019. However, the jury is still out on Brexit, some experts believe it will positively impact the UK construction industry, while there is another group that forecasts doom and gloom for the UK economy. Construction costs in Britain are moving upwards again in the 2.1% to 2.5% range. British Trade Unions are looking for increases in hourly wage rates of between 4% and 6%, if this happens look for inflation and construction cost to start increasing in the remainder of 2019 and beyond. Overall, the UK construction sector is projected to contract in 2019 by 2.5% to 5% due to the uncertainty of the Brexit situation. The UK GDP is forecast to grow to 1.2% range for the remainder of 2019, the unemployment rate is moving up slightly, the current rate is 4.3%, and construction unemployment is higher in the 5.2% to 6.5%. Inflation is projected to be in the 1.8% to 2.2% range by the end of 2019.
Germany is still the #1 country and largest economy in the European Union, if Germany catches a cold then you can assume that the rest of Europe will be sneezing. Unfortunately, as we move further into 2019 the German economy is not performing to its full potential, minimal growth appears to be on the cards for Germany for the rest of the 2019. The Nord Stream 2 Pipeline Project (a controversial infrastructure / pipeline project supplying gas from Russia to Germany) has recently broken ground and is the cause of a fair amount of political infighting in the German Bundestag. Construction activity in Germany is forecast to decline by 3% to 5% in 2019 over 2018 levels. German inflation rates are forecast to be 1.7% to 1.9% for the remainder of 2019. The German GDP continues to be low at 0.7% to 0.9% for the remainder of 2019. The German overall industry unemployment rate is forecast to be 3.3%, the construction industry is somewhat higher ranging between 5.1% & 5.6%. Germany is planning to de-commission a number of coal and nuclear power plants in the next 10 years, look for an increase in wind, solar and gas fire power facilities to take the place of these de-commissioned facilities.
France continues to have massive “yellow vest” protests in Paris & many cities around the country, these protests have been going on for the last four months and appear to be getting worse. These protests, of course, are impacting the overall French economy. French inflation rates are forecast to be 1.3% to 1.6% for the rest of 2019. French GDP continues to be extremely low at 0.2% to 0.4% for the remainder of 2019. France’s overall industry unemployment rate is forecast to be 8.8% for the balance of 2019, the construction industry is somewhat higher ranging between 10% & 12%. The construction sector continues to experience minimal growth; there are number of major infrastructure / transportation projects in the pipeline, but nothing to get excited about.
The majority of countries in Western and Eastern European will continue to experience a contraction of the construction sectors in 2019, Brexit, the ongoing Ukraine standoff with Russia, concerns about future possible US protectionism focused on German automobiles will be the some of the reasons for this situation.